Tuesday, July 10, 2007

The Revolution of Greed and the Music Industry By: Benn Jordan

Huge thanks to Earwax's newsletter for sending this article to me. I found it insightful enough to reprint here. -Wendy

A decade ago, while being an amateur musician and daytime computer technician, a tech-savvy friend of mine called me raving about MP3s. He even sent me some files on my painfully slow dialup connection. He spoke of groups on BBS systems and IRC that were ripping and trading albums. I eventually figured out what they technically were, and how they worked. The technology impressed me, but I didn’t worry about it either. I thought to myself:

“Surely nobody is going to spend 40 hours downloading an album at a horrible audio quality.”

Of course I didn’t speculate how advanced the internet would become 10 years later. Terabytes, iPods, wireless networking, and broadband internet…I just didn’t have the foresight. Those who did either fought it or became millionaires.

Now before you start getting excited about being part of a “music revolution”, I’m going to share my rendition of it, which isn’t going to be inspirational in the least bit. The point of all it all is, well, that nearly everyone involved is unethical and greedy. From the largest corporation all the way down to the consumer.

Napster

I was the first guy on my block to be using Napster, and by that point, having started to make a very meek living in the music industry; I started to realize that I was at the beginning of the end. Digital music piracy existed before this time, but Napster made it so damn easy. I’d get into a girl’s car and see a backseat filled with marked CD-Rs. Now you could buy CD-Rs at Walgreens. It became impossible to find a portable CD player as the market flooded with MP3 players. Every software developer in the world was making a shareware CD ripper and encoder.America stopped buying music, and there was a brand new industry to collect on the money everyone was saving while stealing their favorite band’s new albums.

RIAA

The few remaining major labels put on a great show over the last decade. They acted scared to death of piracy, when, in my opinion, they knew exactly how to use it as a tool. As if the recording industry wasn’t monopolized enough, the 5 largest media conglomerates used RIAA (an organization that was formed to create technical standards in music production) to join forces and profit off of what we believed to be their worst nightmare.

After enough lobbying to get the Digital Millennium Copyright Act passed, anyone who pirates (or pirated) music now legally owes RIAA $750 per song downloaded and $150,000 per song shared. Since then they’ve aggressively sued the makers of software, media players, and over 20,000 individuals for violating the copyrights of their albums. My favorite example is RIAA VS. AllOfMP3.com for $1.65 trillion. That’s right, trillion.

They’ve raised prices of CDs to punish us for losses to piracy, while of course; this only punishes honest music customers.

RIAA has now stooped to sending out letters at random accusing internet users of sharing files and directing them to a website, where you can make “discount settlements” payable by credit card.

How can they sue you for $750 for downloading a digital song that’s sold to retailers for less than $0.70? I have yet to hear the answer to that question.

So naturally, I think to myself: “Hey! I own a record label! How can I get involved in this profit party?”. Oh, RIAA is a private club. Small businesses don’t seem to be allowed.

So does this mean that if I sign with a major label I’ll get my fair share of these lawsuits battling the theft of my material? Nope. Artists are only compensated for post-recoup sales. 0% of this lawsuit money is trickled down to the artist.

So basically, if you’re not one of these companies, you can’t win.

The Consumer

I’m not going to be one of those artists who pretend to support music piracy. I’m not even going to deny that I’m tempted to stab the occasional person who compliments my music by saying “I downloaded all your albums and…” After all, the greedy consumers are the ones who made all of this possible. Anyone who’s gone through the epic saga of making, negotiating, signing, and promoting an album can surely agree with me. If I wanted my music to be free, I’d have it for free download on my website. I’d give away CD-Rs at my shows. If I don’t personally give you a copy of my album, then I don’t approve of you having it without compensating me for it. Plain and simple. However, I won’t be suing anyone for $750 a song of course.

The problem is, RIAA has been depending on music pirates to destroy the independent market, and the independent music fans have done just that.

When I was on tour with Dillinger Escape Plan, a website in Eastern Europe was hosting most of my albums on an HTTP server for free. These sites were so heavily trafficked that when you searched my name in Google, the pirated albums would show up before my own website would. No label had the funds to help me with legal fees, and I ended up losing upwards of $2,000 out of pocket to pursue just the cease and desist order of this web server. I, nor my labels, could afford an actual copyright lawsuit. The reason this couldn’t be afforded by an otherwise well-run record label was because we were facing a stifling 1 to 9/purchase vs. pirate statistic for the genre.

It only grew worse. Labels started dropping like flies. Successful labels like Schematic and Merck have gone bankrupt from piracy. Now, the greed has hit home.

Sublight Records, R.I.P.

It wasn’t breaking news to me. A while ago I knew that if my next album as The Flashbulb (Soundtrack to a Vacant Life) didn’t sell a miraculous amount of copies, Sublight would be done. I wasn’t expecting to bring miracles. In a way, even though it would be at my own expense, I liked the idea of providing the label’s first and last albums. I felt that since Aaron Rintoul had faith in me to kick start the label, that I should be the one to go into the coffin with it. Unfortunately it was too late.

While attendance on my tours has been rising, and while I can’t seem to make enough T-shirts to sell on my own site, the music sales have again dropped. Aaron came to terms with everything and realized that his love for music combined with the lack of ethics in many of his listeners would result in unrecoverable debt. All releases after this month’s compilation are canceled, including ‘Soundtrack to a Vacant Life’, and Sublight Records will close its doors forever. Music lovers have lost one of the only labels that discriminate strictly on the art of the trade.

The Numbers

As I started meeting more musicians who had well exceeded me in notability and record sales, I noticed that most of them were worse-off than I was financially. This is because a very small part of my work schedule goes to working for film and advertisement agencies. But surely, someone selling 200,000 records should be in a way more secure place than I am! Wrong.

So for the first time in years, I started going through my numbers. Since the Sublight days I never really cared about the specifics of sales since it was pocket change compared to what I was making from touring and licensing. My record label, Alphabasic, has intentionally never shaken hands with a big distribution network, so my head was buried in a hole. A couple years ago, I didn’t think I was capable of selling more than 1,000 CDs. When finally paying attention, I was surprised and to find that most of my albums have sold out and gone through multiple reprinting cycles. You’d expect me to be delighted, but I was horrified. Someone, somewhere in the cycle, was ripping me off…BAD. So in the recent months I began nosing around, trying to figure out where all this money my albums were making was going.

After all, how could I be making a few hundred bucks for every thousand CDs I’m selling when the retail prices of my CDs are upwards of $15?

I always considered myself to be a good businessman. After all, I come from a family and area that did nothing but negotiated and haggled their way through life. My contract with record labels are of the best I’ve ever seen. I’ve always had a very strict policy on the profit and control I retain for my work and name, and I’ve turned down offers from much larger labels for that very reason. Larger labels offer unbeatable promotion to boost sales, but it’s at a cost, and in the end, that cost comes out of my pocket. I don’t release albums with the goal of being in Rolling Stone Magazine or being interrupted by a fan while my girlfriend and I eat dinner. I release albums because I have a passion for writing them, and because it feeds me. Being on top of some pretentious musical hierarchy doesn’t contribute to my happiness; in fact, it waters down the beauty of the creative process. With that being said, what the larger labels offer has no benefit for me and my interests.

So it definitely wasn’t Sublight who was walking away with the loot. Aaron, in fact, was living on much lower income than most of his artists. I moved up a step and started talking to distributors. They made their cut, but again, it was a petty one. In fact, independent music distributors are in the same dwindling shape as independent labels and small record shops that buy direct from labels. So, was it really possible that Best Buy, Amazon, or Borders were making more money than everyone else combined when they sold one of my albums?

You see, since I’m not on a major label, these retailers can consider my albums “rare”. They claim that they’re more valuable, yet they buy them wholesale for the same price, if not less than what they buy a Madonna album for. I’ve seen Kirlian Selections tagged as high as $33.99, and it was on backorder! That means that they take your $34, keep $26 of it, then order the CD for $8 from the distributor, and ship it to you (for a nominal shipping fee of course). In the end, you’ve paid over $37 for a CD that mechanically costs $1.17 to make. All of this while I’m trying to discourage my fans from pirating my music!

It all started making sense. The richer the middleman between artist and consumer, the more they were profiting from my music. How did it get so bad? Music piracy is forcing independent labels to make less quantity of their albums, while retailers claim a higher value and double their profits. My fans spend more money, we make less, and corporate retailers make more.

The iTunes Scam

Since I completed the almost impossible task of trying to figure out where all of my iTunes royalty went, I was equally disgusted as I was with the numbers outlined above. Apple is no different than Best Buy, Wal-Mart, or RIAA when it comes to bleeding the creator of the music for everything they have. Not only is it an unfair share they claim, somewhere in the “digital distribution system”, all of the remaining profit gets eaten up.

Here’s an average example of where your money goes when you buy an independent record label’s song from iTunes (Note that major label’s figures are much worse, and some independent label’s deals are better when using an ethical distributor).

How did it get like this?

When Apple first opened iTunes, I sent them email after email for years asking how I could get Alphabasic’s content in their program. I filled out their applications over and over again, and not once would they grace me with a response. Many of my friends that run other labels dealt with the same problem. Of course the largest labels had no problem getting on iTunes, and took a head start in paving new ways to continue screwing artists out of their cut. Today anyone can be on iTunes, of course they’ll have to go through a digital distributor or pay a fee through another middleman. Lucky individuals like me can get involved with an ethnical digital distributor such as “Storming the Base”, that doesn’t think its right to take an additional profit off of a download. These distributors are still few and far between, and often only distribute music they endorse.

Last year, Apple’s website promoted iTunes as “Fair to the Artists”. Believe me, nobody hates Apple’s false advertising tactics and poor business practices more than myself, but this one hit home. I sent Apple letters and emails asking them to display an artist’s cut of each album on the iTunes interface if they truly believe that what they’re doing is fair. While, of course, this never happened, they did change the site to remove the false claims of their fairness. The part of these new music delivery methods that sickens me is that it’s all unnecessary in its current form. If we weren’t so distracted by RIAA’s “Sue America” campaign, we could’ve taken control of the entire industry. Unlike 15 years ago, middlemen between the artist and music-lover are not needed. This technology is incredible, and it should’ve destroyed the financial exploitation of musicians, not perpetuated it. There are no more production costs, distribution costs, or shipping costs in digital media, and promotion is much easier. The major label, the distributor, and the retailer are almost obsolete. But no. Again, artists are still the ones who work the hardest for their product, but profit the least from it.

New Ideas

I’ve been working on “Soundtrack to a Vacant Life” for about 2 years, much more time and money than I’ve ever dedicated to an album. One would think that the collapse of its record label would upset me, but I’m oddly happier. 3 months ago everything was tightly negotiated and cast in stone. I knew what sales figures to expect, the artwork limitations, and the budget limitations.

The day I got the email from Sublight delivering the bad news, I got excited and inspired, for the first time in my life, to release and promote an album. The album is an attempt to “score” the most inspiring and important parts of my life. For a piece of work that I’ve slowly crafted for 2 years, it’s no wonder my moral was at an all time low. It’d be exploited through piracy, and the small percent of conscientious fans who purchased the CD would get a an economically designed jewel case and pay twice as much for it, in which I would be sparsely compensated.

Amazon and Ebay would take out ads for it on Google, and 20 year old reps from Cingular would probably continue to try and persuade me over email to let them make ringtones out of it. I couldn’t be happier to remove it from the exploitive aspects of the music industry and regain control of what happens to my work. It’s at perfect timing too, as I’ve recently acquired 100% ownership of Alphabasic. If my ideas are too optimistic or pretentious, then I’ll be the only one taking a financial hit. I no longer have to worry about other people’s investments, which allows me to be more creative.

I’m happy to announce that “Soundtrack to a Vacant Life” be released this year in its 100% unaltered format, and it’ll be something you’ll want to buy. I’m going to put a lot of time and money into the artwork, the packaging, and the quality. If all goes well with negotiations, I’ll even release an early limited edition with an accompanied professionally printed book of my photography, custom tailored for the album.

Half Record Label, Half Alliance

I have to admit that Alphabasic’s growth has been stubbed by my own schedule and pessimism. It was never planned to be a record label that sold CDs through retailers, and most of our releases have been sold at live events or on the internet. This led to accidental success. When we released the CD version of “Acidwolf – Legacy, 1995-2005”, we were simply too busy to deal with negotiating distribution deals. The CD was exclusively sold on the website and at some raves.

I made more from the limited pressing of a one-time-alias release than I have from my larger releases as The Flashbulb. That may not seem stunning at first, but think about it. My “The Flashbulb” alias has been used while I’ve supported big acts on tour, and it’s been credited on award-winning ad campaigns that have been viewed by over 100 million people. Those are big numbers, but facing the uphill battle against piracy and financial exploitation, they can’t compare to releasing a creative product to your own network of supporters that grows through word of mouth. Let’s take a look at where people’s money went for Acidwolf, as you can see, the system is much simpler:

While my customer spent less money and got more expensive, creative, and collectable packaging, I received over 25 times more compensation for the album by cutting out the corporate retailer. The 18% reflects my initial investment for the album, which was returned by nearly 5 fold. I’m currently trying to release some of the other albums canceled by Sublight under this system. The artists will have the option of working under the profit and distribution methods similar to the one above, or having the CD manufactured by the distributor and shipped to retailers, which is more similar to their original deal with Sublight. As for the four albums I have on Sublight, I will be acquiring the rights to them and may remanufacture them under one of these systems for future sales.

This is Plan Z

At least until there’s a major shift in the way things work in the music industry, it is becoming an increasingly painful experience to be a part of the “system”. I can only hope that decreasing retail price, increasing artist profit, and making a more genuine product will be a good compromise against the staggering effects of music piracy; hopefully enough to keep an independent record label above water to do its job, which is release quality, artistic music that challenges the listener.

My other options require me to sign with a bigger label that will want an exclusive percentage of income made from my name and licensing rights. As some of you would guess, I make most of my living from licensing and composition and would never be foolish enough to sign that income away. So my fingers are crossed. I still love contributing to the world of music.

The recipe is simple. Many of us artists have people who enjoy buying and listening to our music. It’s time to starve out the portion of the music industry that has treated us so poorly, which is nothing short of ironic, because they need us a lot more than we need them. No modern consumer is going to stop listening to their favorite band because Circuit City doesn’t carry their CD.

Thank You

…for reading my rendition of past and current events in the music industry. I hope it helps those who pirate music understand what their actions are doing to smaller artists, labels, distributors, and retailers. I hope it helps people understand where their money is going when they do buy music from larger retailers.

Almost always as a rule, the best way you can support an album is by ordering directly from the record label if possible.

If my decisions with the future of my career and my label’s fate are at all successful, I hope that they’ll stand as an example of how much more artists can be getting compensated for their hard work by refusing to do business with the reptilian giants that are trying to fool us with the illusion that they still control the music industry.